Hedge Funds Double Money in Commercial Paper Thaw: Canada Credit

Patience and deep pockets are paying off for King Street Capital Management LP, Anchorage Capital Group LLC and other hedge funds that may double their money on holdings arising from a record C$32 billion debt restructuring.

The funds were among investors able to obtain as much as 96.5 cents per dollar of face value at an auction last month for the top-rated slice of C$1.5 billion ($1.38 billion) of debt created from asset-backed commercial paper investments frozen after the Canadian market collapsed in 2007, according to two people familiar with the trades. Hedge funds hired Moelis & Co. to organize a unified approach to the investments after a court-ordered conversion of the short-term instruments into longer-maturity holdings in 2009 allowed them to buy some notes for less than half of face value.